May 11 2018

Turkey says lira will stabilise once global problems abate

Turkey expects the lira to stabilise as soon as concern about regional and global developments starts to abate, Economy Minister Nihat Zeybekçi said amid calls for the central bank to raise interest rates to help bolster the currency.

Zaybekçi, speaking to state-run Anadolu agency on Friday, said he didn’t agree with how the lira had performed against the dollar in recent weeks, pointing to Turkey’s macro-economic indicators, and increases in exports, tourism, investment and employment.

Economists are calling on the central bank to act to rein in inflation and the current account deficit through increases to interest rates, which would slow demand for goods and services and help tackle trade imbalances.

President Recep Tayyip Erdoğan, who has opposed increases in interest rates, called a meeting of economy officials this week after the lira slumped to a record low of 4.37 against the dollar, raising expectation that the central bank would call an emergency meeting and act. The lira has since strengthened to 4.25 per dollar. No statement from the central bank has been forthcoming.

The bank is due to convene for its next regular meeting on interest rates on June 7.

Zeybekçi, a former mayor known to be particularly close to Erdoğan, said he accepted that the slide in the lira was hurting Turkey’s battle against inflation, but the government would tackle double-digit inflation while also increasing domestic demand.